Spotlight on economy: How much are consumers spending and how do they feel

The economy expanded in the spring and early summer at the fastest pace in nine months, but growth is unlikely to remain at the second quarter’s 2.5% pace unless consumers keep spending at current levels and become more upbeat.

The first glimpse at consumer habits in the third quarter comes out Friday morning. Americans likely increased spending by a modest 0.3% in July, down from 0.5% in the prior month, according to economists polled by MarketWatch. The Commerce Department will release the report at 8:30 a.m. Eastern.

Spending has been restrained in part by higher U.S. tax rates and slow growth in wages. Yet a steady increase in hiring this year has injected more cash into the economy to help stabilize the nation’s growth at around 2%.

Personal income, meanwhile, probably rose a smaller 0.1% in the first month of the third quarter, the MarketWatch poll shows. Incomes rose by a preliminary 0.3% in June.

Inflation is not expected to raise any concerns. The core PCE inflation index, which omits food and energy, is forecast to rise a mild 0.2%.

Later in the morning, at 9:45, a gauge that measures manufacturing in the Chicago region is projected to show a small uptick in August, to 53.5 from 52.3 in July. U.S. manufacturers appear to have seen some pickup in demand toward the end of summer.

Economists expect little change in a closely followed consumer sentiment survey. The index, released at 9:55 a.m., is forecast to tick up to a final level of 80.5 in August from a preliminary estimate of 80.

The initial August reading dropped from 85.1 in July, which was the highest level in six years, led by gloomier views on current and upcoming economic conditions. The report is produced by the University of Michigan/Thomson Reuters.